reporter
Posted on:
- Last year, more than $7 trillion in transactions were settled through stablecoins.
- Recently, the circulating supply of ERC-20 stablecoins has increased significantly.
Slowly but surely, stablecoins are emerging as a viable medium of exchange globally. According to a recent report from USD Coin (USDC) issuer Circle, more than $7 trillion in transactions were settled using stablecoins last year.
This is a significant milestone compared to payments giants Visa and Mastercard’s combined $14 trillion in global payments.
Refocus on stablecoins
Unlike some other volatile cryptocurrencies, stablecoins are tightly tied to native fiat currencies, especially the U.S. dollar (USD). The unique combination of decentralization and market value stability has broadened the scope of stablecoins in recent years.
According to AMBCrypto’s CryptoQuant research, the circulating supply of ERC-20 stablecoins has increased significantly over the past month.
Source: CryptoQuant
This increase in stablecoin market capitalization serves as a bullish signal for the broader cryptocurrency market. This is because most traders use stablecoins to enter and exit trades on cryptocurrency exchanges.
Stablecoin market capitalization has been declining since the sudden collapse of Terra USD (UST) last year. As broader market sentiment turned bearish, trading activity declined and thus demand for stablecoins.
However, the bullish vitality injected over the past two months has brought renewed focus to these cryptocurrency derivatives.
Will stablecoins continue to support the bull market?
Ahead of the market rebound that began in mid-October, the supply of Tether (USDT) on exchanges began to gradually increase. In fact, AMBCrypto found using Santiment data that between August 19 and October 16, approximately 3.54% of supply moved to exchanges. This was most likely done to purchase other cryptocurrencies.
Following supply reductions in November, USDT holdings on exchanges are back to October levels as of press time. If history is any guide, this could portend another burst of buying activity in the coming days.
Source: Santiment
Solana drives stablecoin growth
Lastly, Solana (SOL) had the highest increase in stablecoin supply last week, at over 8%, according to AMBCrypto’s DeFiLlama data research.
This surge was triggered by a 21% increase in USDC deposits while USDT supply remained largely unchanged.